Lufthansa’s Austrian Arm Plans for Growth After Lowering Costs

Deutsche Lufthansa AG’s Austrian Airlines said it will add tourist destinations and a new pricing model in a plan to boost passenger numbers by more than 10 percent in coming years.

Austrian, which specializes in traffic to eastern Europe, seeks to carry 1.5 million extra passengers and add about 210 million euros ($235 million) in sales in the next three to five years, the Vienna-based carrier said in a statement on Tuesday.

Austrian has become the carrier with the lowest operating costs in the group, thanks to an agreement with employees to accept lower pay. That sets it up for expansion and also for taking over more routes for other airlines within the group, after being among Lufthansa’s least profitable operations since joining the company in 2010.

“The restructuring of the past years has made us fit again for the rough airline markets,” Chief Executive Officer Jaan Albrecht said. “We now have a solid foundation and chances for growth, which we plan to seize.”

The carrier has annual revenue of 2.1 billion euros and carried 11.2 million passengers in 2014, according to the statement. It cut the number of flights by 6.4 percent last year, as traffic to eastern Europe declined following a military standoff between Russia and Ukraine. That compared with a drop of 2.6 percent for the Lufthansa group overall.

Austrian plans to increase its workforce of 6,000 by about 400. The unit will introduce three economy fare options, the cheapest allowing carry-on luggage only, in addition to business class. It plans to expand services to destinations including Mauritius and Sri Lanka’s capital Colombo, while phasing out its aging fleet of Fokker aircraft for medium-range jets from Embraer SA by 2017.

Austrian aims to end four years of stagnating revenues and passenger numbers, partly by operating services on behalf of Lufthansa’s main brand, its Swiss arm and its Eurowings low-cost platform. Lufthansa acquired the carrier in 2010.

Next month, Albrecht will leave his post to become head of SunExpress, Lufthansa’s joint venture with Turkish Airlines serving holiday destinations in Turkey and the Mediterranean region. Kay Kratky, currently head of Lufthansa’s Frankfurt operations, will succeed Albrecht as Austrian’s CEO in August.

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